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Wednesday, November 21, 2012

The States Fight in the Last Ditch Against Obamacare

Last July, I wrote that the states still had the power to kill Obamacare, despite the Supreme Court's gross dereliction of duty in Florida v. HHS. My point was that the insurance exchanges required by PPACA are the key to its success or failure, and that the law grants the states enormous power in the way they are set up. The ostensible purpose of these exchanges is to provide “marketplaces” where people without health insurance can acquire subsidized coverage. Ironically, the law doesn’t actually require states to set up these bureaucracies. Yet, as Sally Pipes and Hal Scherz note, “only state-based exchanges … may distribute credits and subsidies.”

In other words, if the states refuse to set up exchanges, they cut off the subsidies and tax credits that are the lifeblood of Obamacare. Moreover, states that decline to set up these enabling bureaucracies will also be protecting their business communities from job-killing federal penalties -- even if the federal government comes in and sets up its own exchanges in those states. The Cato Institute's Michael Cannon explains, "defaulting to a federal exchange exempts a state's employers from the employer mandate -- a tax of $2,000 per worker per year." This is why more than half of the 50 have opted not to set up state-run exchanges.

Last Friday, three more governors officially announced their refusal to set up state-run Obamacare exchanges. Ohio's John Kasich, Wisconsin's Scott Walker, and Maine's Paul LePage all released statements indicating that they would not assist the Obama administration in its effort to socialize health care in their states. All three governors made their decisions based on the knowledge that, even if they cooperate on the exchanges, they would have little control over how the exchanges are operated. As Cato's Cannon puts it, "[A] state-created exchange is not a state-controlled exchange. All exchanges will be controlled by Washington." Read more...